* Republican lawmakers won’t support “blank check” debt limit increase
* Keystone XL, medical device tax seen as possible conditions
By David Lawder
WASHINGTON, Jan 24 (Reuters) - Congressional Republicans are showing little stomach for another bruising fight over the U.S. debt limit next month, but they do want to extract some concessions in exchange for expanding the Treasury’s borrowing authority.
A senior Republican aide said that the party’s leaders in the Republican-controlled House of Representatives are in “listening mode” and seeking ideas from rank-and-file lawmakers.
The options range from demands for expanded offshore energy production to small tweaks in President Barack Obama’s healthcare law to approval of the Keystone XL oil pipeline. Another idea put forth would involve overhauling federal job-training programs, an element in a House Republican jobs bill that has gotten no traction in the Democratic-controlled Senate.
“If the president is asking for a blank check, we’re not going to do that,” said Representative Luke Messer, an Indiana Republican who serves on the House Budget Committee.
“I won’t support a debt limit increase unless it is partnered with policies that will either reduce the deficit or help grow the economy,” he added.
Obama and congressional Democrats have vowed not to negotiate over raising the debt limit, arguing that it is Congress’ responsibility to ensure that its spending obligations can be paid.
“We will not negotiate over whether or not the United States of America should pay its bills. And once again, before they get any further down this damaging path, we call on our Republican colleagues to not play politics with our economic recovery,” Senator Patty Murray, chairwoman of the Senate Budget Committee, said in a letter to colleagues on Friday.
After last fall’s government shutdown battle and two subsequent bipartisan fiscal deals, Republicans are focusing on demands that they believe Democrats might support. For example, a proposal to get rid of a tax on medical devices has garnered Democratic support in the past, though attaching it to the debt limit legislation would make it more controversial.
Representative Tom Price, a conservative Republican from Georgia, said he also would like to see other adjustments to Obama’s landmark 2010 healthcare law considered as part of the debt limit debate, including to the so-called “risk corridor” provision that compensates insurers if they wind up with an especially unhealthy and costly mix of customers under the program.
“Nobody is interested, on our side of the aisle at least, in bailing out insurance companies. I would hope that the president isn’t interested in bailing out insurance companies, and (Senate Majority Leader) Harry Reid isn‘t, so maybe there’s some common ground there,” said Price, who is a physician.
House Republicans will formulate their conditions for an increase in U.S. borrowing authority next week at a retreat in Cambridge, Maryland, a Chesapeake Bay resort town.
House Speaker John Boehner has recently softened his tone, calling last week for swift action by the House and Senate to raise the debt limit, and saying that the United States “shouldn’t even get close to” default.
“No one wants another market-rattling showdown, but, at the same time, a ‘clean’ increase can’t pass the House, or - most likely - the Senate,” said a House Republican leadership aide who requested anonymity.
What House Republicans aren’t talking about so far are demands for major cuts to the federal benefits programs known as entitlements - Social Security, Medicare and Medicaid - which are widely viewed as the biggest contributors to future debt growth.
Obama and Democrats have successfully resisted changes to these programs through three years of fiscal showdowns, and Republicans appear to be changing tactics.
Still, it’s unclear whether Democrats will accept even scaled-back Republican demands on the debt limit.
A senior Senate Democratic aide said Congress should simply increase the debt limit so that the United States can pay its bills on time.
“There are no talks whatsoever about considering any ransom demands from Republicans. Republicans are having this conversation entirely with themselves,” the aide said, speaking on condition of anonymity.
On Wednesday, Treasury Secretary Jack Lew sought to raise pressure on Congress for swift action, saying the government would exhaust its borrowing capacity by late February.
As part of the deal that ended the shutdown last October, Congress suspended the debt ceiling until Feb. 7. The Treasury can employ extraordinary cash-management measures to stave off default, but these won’t last long, because February is traditionally a big deficit month as tax refunds are paid out.
The debt-limit fights have proven costly in the past, helping the United States lose its top-tier credit rating from Standard and Poor’s in 2011.
While it was unclear how close the Treasury came to a debt default last October, financial markets showed clear signs of stress, in some cases shunning what has traditionally been regarded as the safest, most liquid security on the planet: short-term U.S. Treasury debt.
Some banks and money markets refused to accept some Treasury bills as collateral for short-term loans, disrupting the $5 trillion repurchase market, a key source of day-to-day funding for the financial system. Prices fell, pushing yields on one-month Treasury bills up to levels not seen since the depths of the 2008 financial crisis.
But the latest showdown, coupled with Congress’ ability to pass budget legislation over the past two months, may have set the stage for smaller, more manageable disagreements.
Steve Bell, a former Republican Senate Budget Committee staff director who is now with the Bipartisan Policy Center, said he believes debt limit demands will be “minor” and there is a good chance for other legislation, such as immigration reform, to take a more prominent role in Congress this year.
“I really think we have a chance this year to be really calm on the fiscal front,” Bell said.